ON-Lion Letter

An August paper from the Tax Foundation in Washington, D.C., "simulates both the economic benefits and budgetary costs of a cut in the corporate income tax rate from the current 35 percent to the OECD average corporate income tax rate of 25 percent, the current UK corporate income tax rate of 20 percent, and the Canadian federal corporate tax rate of 15 percent," according to the paper itself.

"A reduction in the corporate income tax rate to 25 percent would increase the size of GDP by 2.3 percent at the end of the adjustment period," continues "The Economic Effects of Adopting the Corporate Tax Rates of the OECD, the UK, and Canada," by Tax Foundation president Scott Hodge.  "A further cut to 20 percent would boost long-term GDP by 3.3 percent.  A cut to the Canadian federal corporate income tax rate of 15 percent would have the largest impact, increasing GDP by 4.3 percent over the long-term.

"Workers would also benefit from a corporate rate reduction," Hodge finds.  "Depending on the size of the corporate rate reduction, we would expect to see an additional 425,000 to 613,000 new jobs, and wages would increase by between 1.9 percent and 3.6 percent over the long-term.

"Regardless the size of the corporate tax cut, the larger GDP would translate into higher after-tax incomes for taxpayers up and down the income scale," he further finds.

"Using conventional scoring, these three corporate tax cuts to 25, 20, and 15 percent would cost $1.2, $1.8, and $2.5 trillion over the next ten years," Hodge concludes.  "However, using the more realistic assumption that these cuts would increase the size of GDP, their costs would be closer to $746 billion, $1.1 trillion, and $1.5 trillion over the next decade."

The Lynde and Harry Bradley Foundation supports the Tax Foundation.

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